Correlation Between Boston Beer and Thyssenkrupp
Can any of the company-specific risk be diversified away by investing in both Boston Beer and Thyssenkrupp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Boston Beer and Thyssenkrupp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boston Beer and thyssenkrupp AG, you can compare the effects of market volatilities on Boston Beer and Thyssenkrupp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Boston Beer with a short position of Thyssenkrupp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Thyssenkrupp.
Diversification Opportunities for Boston Beer and Thyssenkrupp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boston and Thyssenkrupp is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG and Boston Beer is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Boston Beer are associated (or correlated) with Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Boston Beer i.e., Boston Beer and Thyssenkrupp go up and down completely randomly.
Pair Corralation between Boston Beer and Thyssenkrupp
Assuming the 90 days trading horizon Boston Beer is expected to generate 1.14 times less return on investment than Thyssenkrupp. But when comparing it to its historical volatility, The Boston Beer is 1.89 times less risky than Thyssenkrupp. It trades about 0.18 of its potential returns per unit of risk. thyssenkrupp AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 324.00 in thyssenkrupp AG on September 25, 2024 and sell it today you would earn a total of 66.00 from holding thyssenkrupp AG or generate 20.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
The Boston Beer vs. thyssenkrupp AG
Performance |
Timeline |
Boston Beer |
thyssenkrupp AG |
Boston Beer and Thyssenkrupp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Boston Beer and Thyssenkrupp
The main advantage of trading using opposite Boston Beer and Thyssenkrupp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Thyssenkrupp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Thyssenkrupp will offset losses from the drop in Thyssenkrupp's long position.Boston Beer vs. FOMECONMEXSAB DCV UTS | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA | Boston Beer vs. Heineken Holding NV |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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